Recent fiscal interventions have raised concerns about US public debt, future fiscal pressure, and long-run economic growth. This paper studies fiscal policy design in an economy in which: (i) the household has recursive preferences and is averse to both shortand long-run uncertainty, and (ii) growth is endogenously sustained through innovations whose market value is sensitive to the tax system...

The lack of wind power’s assimilative capacity has become a bottleneck of wind power’s large-scale development in the future, while the bundled transmission model of wind power is highly recommended by many scholars at present. However, due to the distemperedness of China's current fiscal policy, the involved parties cannot get the corresponding policy incentives and the economic compensation f...

The theoretical literature on common pool problems in fiscal policy suggests that government fragmentation increases public expenditures. In parliamentary regimes, the fragmentation hypothesis refers to (i) coalition governments and (ii) cabinet size. This paper explores the effect of coalition governments and cabinet size on public expenditures with panel data covering all 16 German States ove...

The paper investigates the stabilizing potential of fiscal policy in a monetary union. The discussion about fiscal stabilization policy has been revived in the context of EMU. We consider a taxation-based stabilization policy, where the fiscal authority intends to minimize the output gap. As policy instrument, we consider a time-varying component in taxes on consumption. The model combines a mo...

We provide a multiperiod model of political competition in which voters imperfectly observe the electoral promises made to other voters. Imperfect observability generates an incentive for candidates to offer excessive transfers even if voters are homogeneous and taxation is distortionary. Government spending is larger than in a world of perfect observability. Transfers are partly financed throu...

Alan Auerbach has given us a valuable paper loaded with new empirical research on the macroeconomics of fiscal policy. I agree with his basic conclusion that there is “little evidence that (the effects of discretionary fiscal policy) have provided a significant contribution to economic stabilization, if, in fact, they have worked in the right direction at all.” I, therefore, concur with his sup...

Although fiscal policies of central governments sometimes provide modest insurance against regional income shocks, this paper shows that procyclical fiscal policy among provincial governments can easily overwhelm these stabilizing effects. We examine the cyclicality of budget items among provincial governments in seven federations, showing that own-source taxes are generally highly procyclical,...

This paper shows that optimal fiscal and monetary policy is generally time consistent in a standard small open economy. Further, there exist many maturity structures of public debt capable of rendering the optimal policy time consistent. This result is in sharp contrast with that obtained by others in the context of closedeconomy models. In the closed economy, the time consistency of optimal mo...

We study the cyclical behavior of fiscal policy to explain why some countries exhibit pro-cyclical fiscal policy stances–being expansionary in good times and contractionary in bad times. We develop a model that links the polarization of preferences over fiscal spending to the pro-cyclicality bias. We then present evidence that social polarization as measured by income inequality and educational...

This paper investigates the relationship between accounting information and stock returns for TSE firms over the past 10 years. We construct a simple financial score designed to capture short-term changes in firm operating efficiency, profitability and financial policy. Our score exhibits a strong correlation with market-adjusted returns in the current fiscal period. The correlation remains sig...